©1990 ESSELTE MAP SERVICE, Stockholm, Sweden
-. Sukkcnoppcn
~
.
Godthab"
Frud<!llksh~b •
'
f _ ~.;,' ', • Narssarssuaq Julianehilb0 "'t. ~
LABRADOR
SEA
©1990SAS
You get a lot when you fly
SAS EuroCiass to Scandinavia.
But never a middle seat.
Jii.Jil
That's becau~e our sp~cious 2x2x~ s~a~ing guaran-- guaran-- tees you a w1ndow or a1sle seat. Wh1ch 1s JUSt one of the comforting reasons so many business travelers choose EuroCiass. At the airport, EuroCiass welcomes you ~with a separate check-in. And a Business Class lounge to ....L relax in.When you arrive in Scandinavia you can even check in to your handpicked SAS Business Hotel right at the airport. When you check out,
Ill
we'll even check your luggage and give you a boarding pass, right at the hotel. Meanwhile, every SAS transatlantic mile has earned you OnePasssM or Mileage PLUS® mileage credits.EuroCiass makes business travel easier. Whether you leave from New York,~ Chicago, Los Angeles or Seattle. It's just one example of"<' how we're turning our airline, hotel and catering businesses into a total travel service to serve you better in this exciting new decade.
To find out about EuroCiass, nonstops to Scandinavia and easy connections to Europe through Copenhagen, ~
call your travel agent, ~
&~
7...
ur.l:
corporate travel departmentor SAS at 1-800-221-2350. ®
APRIL 1992 NUMBER 315
MAGAZINE oF THE EuROPEAN CoMMUNITY
SPECIAL REPORT
Integration vs. Disintegration. While Europe is uniting, the former Soviet Union is dissolving. Lionel Barber 6
The Old and the New. How the former U.S.S.R. has changed. Or has it? Martin Walker ro
Interview: Michael Emerson. The E. C.'s Ambassador to Moscow speaks out on the situation in Russia and E. C. assistance. r 2
On the Way To Moscow. Relief workers struggle to deliver food and medicine directly to the people. Peter Laufer r 4
Interview: JeHrey Sachs. The Harvard economist and Y eltsin advisor speaks candidly about Russia's attempt to build a market economy.
r
6Changing the Stakes. In the cold war's aftermath, geo:finance replaces geopolitics. Martin Walker r 8
FEATURES
Interview: Carl Bildt. Sweden's Prime Minister talks about his country's bid to join the European Community. 20
Sweden and the E.C. A heavenly match? Inger Arenander 22
MEMBER COUNTRY REPORT
Italy. It Works! Italy has worked its way toward the front of the E. C. class. Niccolo D'Aquino 23
Around Italy. The hot who, what, and where in Italy. 30
The Style Capitql. Has Milan taken over as the world's fashion capital? Nancy McKeon 32
DEPARTMENTS
4 European Scene
36 Capitals 22 42 Sports
44 Books
Letter From
The Editor
" I e task is daunting," says lionel
Barber of the Financial Times, as he discusses what the E. C. and the United States are doing to help Russia and the other Commonwealth of Independent States. Barber points out that while the 1992 Single Market is leading to the realization of the dream of a United Europe the collapse of the former Soviet Union and the Communist governments of Eastern Europe have led to a disintegration process in the eastern _,.,=---, part of Europe. How Europe reconciles these twin challenges
Photograph by Frantz; Styling by Pascale Lemaire; Hair by Oeidre Castronova/ Partners International; Makeup by Derek Rutledge; Model: Julie Bowers of Stars Casting
*Jacket and jeans by Giani Versace, Shoes by Michel
Peny, "Kelly" bag by Ferrabramo.
2 EuHOPE
will determine how the continent will look in the next decade. Martin Walker, formerly The Guardian's bureau chief in Moscow, explains how the European Community has taken the leading role in providing assistance to the Commonwealth of Independent States. Meanwhile, the United States has taken only a supporting role in providing assistance. But, as Martin mentions, the key issue in the new age of Geofinance is not as-sistance but investment in the former USSR.
Peter Laufer, author of Iron Curtain Rising, travels with a private American relief effort to Moscow and indicates that private entrepreneurs are doing more than their fair share to help out the former Soviet citizens.
Sweden has officially applied to join the European Community. EUROPE interviews the new Swedish Prime Minister Carl Bildt and presents his views on the advantages of membership for his country. The Swedish prime minister also explains how he is privatizing many companies and leading a more "conservative" revolution in a country once thought to be the epitome of socialism.
Italy works! Our Rome correspondent, Niccolo d'Aquino, lets us in on a secret-Italy is a prosperous and economically sound nation. The Italian fashion industry is particularly prosperous. Italian
design-ers are considered by many to be the current fashion leaders of the world. Armani, Versace, Gucci, Benetton, are now hoosehold fashion names across America. EUROPE profiles the "hot" Italian fashion in-dustry. And speaking of hot, EUROPE also profiles Olympic Gold Medal skier Alberto Tomba.
If you are planning on attending the Summer Olympics in Barcelona, the World Expo in Seville, or visiting Europe's 1992 Cultural Capital, Madrid-then you should read EUROPEs special May issue, which will focus on 'The Year of Spain." We look forward to your com-ments.
Robert J. Guttman Editor-in-Chief
EUROPE
PublisherPeter Doyle
Editor-in-Chief Robert]. Guttman
General Manager Anne Depigny
Managing Editor Peter Gwin
Editorial Assistants Alice Greenway
Christie Gaskin
Contributing Editors Reginald Dale
Axel Krause
Editorial Interns Leo Charitos
Dominique DeSantis
Shahrokh Moinian
julia Nasser
Design Pensare Design
EUROPE, Magazine of the European Community
(ISSN 0191-4545). is published by the Delegation of the Commission of the European Communi-ties, 2100 M Street, NW, Suite 700, Washington, DC 20037. ©The Commission of the European Communities, 1992. The magazine encourages reproduction of its contents, but any such repro-duction without permission is prohibited. EU-ROPE, published 10 times per year, is available by subscription for $19.95 per year; $34.95 for 2 years; $46.95 for 3 years. Add $10.00 to non-U.S. subscriptions for postage and handling. Student rate (with proof of enrollment): $14.95 per year; $25.95 for 2 years; $35.95 for 3 years. Bulk rate also available. Editorial, permissions, adver-tising, and circulation offices: 2100 M Street, NW, Suite 700, Washington, DC 20037; telephone (202) 862-9555; fax: (202) 429-1766. Available in microform from UMI, 300 N. Zeeb Rd., Ann Arbor, MI 48106; (313) 761-4700. Subscriber services: 1-800.627-7961.
Second class postage paid at Washington, DC.
Postmaster: Please send change of address forrns to EUROPE, P.O. Box 2115, Knoxville, lA 50197-2115
The magazine is a forum for discussion, and therefore its contents do not necessarily re-flect the views of European Community insti-tutions or of the member states.
LOANS
TO BUILD
THE EUROPEAN
COMMUNITY
Europe- a continent on the move.
The European Community's history has been
character-ised by the move towards economic, social and political
uni-fication and expansion in both membership and influence.
Establishing a single European market requires the
balancing out of economic differences between regions and
countries, and the development of trans-European networks in transportation, telecommunications and energy to strengthen
integration and relations with neighbouring countries.
The 1990's are witnessing a sea-change in the Conti-nent's perspectives as the European Community and the
seven EFT A countries(1 l create an enlarged European
Econ-omic Area, and support the new democracies moving
towards market economies in Central and Eastern Europe.
The European Investment Bank, the EC's financing
institution, uses its excellent ("AAA") credit rating to borrow
funds on capital markets for financing investment projects
that promote European integration.
In 1991, the EIB reaffirmed its leading position amongst
the world's major financing institutions, borrowing 13.7 billion
ECUs(2l (US$ 16.7 billion) and making long-term loans for a total of 15.3 billion ECUs (US$ 18.7 billion) for capital
invest-ment located mostly in the European Community.
The EIB borrows and lends in many currencies -in 1991, 18% of borrowings was in ECUs and over 16% in US$. It keeps its accounts in ECUs.
(1) EFTA: European Free Trade Association. (2) 1 ECU =US$ 1.22 on 20/03/92
EUROPEAN INVESTMENT BANK
100 Bvd. Konrad Adenauer, L-2950 Luxembourg
W HAT THEY SAID
•
"Nobody puts his hand on
the Queen. This was a
demonstration of
discourtesy."
-Ceciffrey Dickens, Conservative
member of Parliament, commenting on
A11stralian Prime Minister Pa11l Keatin,1.(s
breach of protocol when he p11t his arm
aro11nd Q11een Elizabeth.
"In a bacteriologically
correct society, what will
become of the Brie de
Meaux, the Crottin de
Chavignol or the Blue
d' Auvergne?"
-Prince Charles q11estioning proposed
E. C. standards that co11ld force a "minim11m hygiene standard" on cheeses
that have a high bacteriolo,~ical contel1t.
"In a society in which the rights and potential of
women are constrained, no
man can be truly free."
-Mary Robinson, Irish President,
commenting on the 11neq11al place women
have in Irish society.
"There is probably more to the notion of the ugly American than there is to
the notion of the rude
Frenchman."
-Michael Wilbon, Washington Post
writer, on how he perceived stereotypes
while covering the Winter Olympics in
France.
"This is a 15th century
fortress. We don't have a lot
of room for cafes."
-Irina Rodimtseva, Kremlin M11sewn
director, opposing the openin,c.t cif cafes
within the Kremlin.
4 EunoPE
"The enemy is
totalitarianism, not Russia."
-Vladimir L11kin, democratic R11ssia's
first ambassador to the U.S.
"Neutrality is becoming
irrelevant. There are still some
people here who would like to
keep the word to describe
Finnish policy, because it has
a certain emotional appeal.
But it no longer means what it
used to."
-Maxjacobson,Jormer Finnish
ambassador to Moscow and the United • Nations, 011 Finland's chan,~inJ!. political state, inc/11ding a bid for E. C. membership
by 1994.
"The stakes are high, and
we are playing as if it were a
penny-ante game."
-Former President Richard Nixon, commenting 011 the BliSh Administration's
policy toward the R11ssian Rep11blic.
"We Germans haven't
forgotten and won't forget
what Gorbachev has done for us."
-German Chancellor Helm11t Kohl.
La Pizza
If you're wandering the
streets ofParis and could swear you just saw a Domino's delivery truck wheeling around the comer, don't think you're halluci-nating-Donuno's has gone European.
Donuno's Pizza Inc., which first opened European franchises in 1985, is expand-ing further on the continent after its initial success. In addition to 7 4 franchises in Britain (where tuna and sweet corn pizza is the rage),
The E.C.
'
s Top Five Ice Cream
and Yogurt Consumers
per capitaSource: Panorama of E.G. Industries 1991-1992 Domino's has three stores in France, one in Germany, and five each in Spain and the Netherlands. Operation contracts were signed to open five more businesses in Lyon and Madrid. Projects are also underway to open 25 franchises in Belgium and Luxembourg, as well as ex-pansion into the Middle East.
While entering m.arkets abroad does not affect Domino's overall business strategy, it does require
alter-Ice Cream
1. Italy
2. Denmark
3. Germany
4. Britain
5. Belgium/ Luxembourg*
Yogurt
1. Netherlands
2. France
3. Denmark
4. Germany
5. Belgium
*Tied for fifth place
ations according to cultural customs and tastes. In the Bahamas one can feast on barbeque chicken pizza; in Japan squid and shrimp are
popular toppings; and in France a pizza "flambee"-containing a creamy white sauce-is a favorite.
But there is one thing all Domino's franchises world-wide will share-all pizzas are guaranteed delivery in under 30 minutes.
All ofthese securities having been sold, th1s amzozmcement appears as a matter ofrecm·d only.
March1992
ECU
135,000,000
The Council of Europe Resettlement Fund
for National Refugees and Over-Population in
Europe
9% per cent. Notes d·ue 1994
Issue Price
100.50°/o
Lehman Brothers International
Banque Bruxelles Lambert S.A.
Credit Suisse First Boston Limited
Bayerische Landes bank
Giro~entraleIBJ
International
Limited
Paribas Capital Markets Group
Salomon Brothers
International
Limited
UBS Phillips
&
Drew Securities Limited
ABNAMROBankN.V.
Bankers Trust International PLC
Credit Lyonnais
Generale Bank
Merrill Lynch International Limited
Morgan Stanley Internationa
l
Swiss Bank Corporation
Banca Con1merciale Italiana
BNP
Capital
Markets Limited
Daiwa Europe Limited
LTCB Inten1ationalLin1ited
Satnuel Montagu
E5
Co. Limited
Nomura International
SPECIAL REPORT
Integration vs. Disintegration
Twin
Challenges
Facing Europe
urope has rarely been short of visionaries. One recalls Jean Monnet, Kurt Schumacher, Roy Jenkins, and lately, Jacques Delors. They have all possessed one quality: the ability to think beyond the present and project a common future for the people of Europe.
The flaw was that this vision was usually limited to western Europe, specifically the European Community. It has been dominated by the desire to avoid a recurrence of another war between France and Germany; and it was by definition ex-clusive. Few European leaders considered how they could incor-porate the countries of central and eastern Europe, let alone Russia, in their plans for greater
political and economic integra-tion for the Continent.
This narrow thinking was ac-ceptable as long as Communism prevailed in the East. But the col-lapse of Communist regimes, which started with the opening of the Austro-Hungarian border in the summer of 1989 and ended with Marxism-Leninism van-quished in its own citadel in Mos-cow in August 1991, has chal-lenged previous assumptions about the meaning of European unity.
rency by 1997 and greater cooperation among the Twelve on for-eign policy and defense, built upon a single integrated market for goods and capital.
Add to this picture the growing number of European states such as Austria, Sweden, and Finland, who would like to join the Community in the near future. Many of these nations which, for their own reasons shied away from the Community during the cold war, now find themselves caught up in the Drang nach
Westen
drawn not only by the magnet of the Single Market but also out of a fear of impending chaos in the East.In many ways the East now bears little resemblance to the uplifting images of late 1989 when thousands of demonstra-tors took to the streets in Prague, Berlin, and Bucharest to overthrow bankrupt Com-munist regimes. It is a region plagued by ethnic tensions, fall-ing economic output, and chronic political instability-captured by the violence in Yu-goslavia, which has claimed hundreds of civilian lives and led to the breakup of Tito's na-tion state.
Sticking to a vision of a Europe based on twelve west European nations is no longer viable. The
The new Europe, in political terms, was best captured by the Maastricht summit,
which laid down an ambitious road map for a common E. C. currency by 1997.
The situation in eastern Eu-rope, however, is similar, in many ways, to 1919 when three empires-Germany, Russia, and Austro-Hungary-col-end of the Cold War has offered theW est an historic opportunity,
as significant as the one missed in 1917 when the United States and its European allies failed to come to the rescue of Alexander Kerensky.
It has also presented the West with what Lenin might have described as an historic contradiction: at the very moment when western European nations are pressing ahead with greater eco-nomic and political integration, the forces of disintegration are gathering pace in eastern Europe, from Yugoslavia to the
repub-lics of the former Soviet Union. How to reconcile these conflict-ing trends-integration and disintegration-will most likely be the E. C.'s greatest challenge in the coming decades.
History will record that there were two Europes in 1992. The first was familiar, comfortable, and startlingly prosperous. Take a look at the glitzy shops in Paris, Milan, or Munich. Take a ride on the modern highways filled with tanned tourists driving the
latest fuel-efficient cars at speeds which would give most Ameri-cans cardiac arrest.
The new Europe, in political terms, was best captured by the
lapsed after World War I. In 1992, the implosion of the Soviet Union threatens to unleash the very same forces of nationalism and authoritarianism which held sway for two decades leading to World War II.
By far the most serious threat lies in the steadily deteriorating relations between Russia and the Ukraine, the two largest Slavic states in the former Soviet Union.
At stake is the newly formed Commonwealth of Independent States (CIS), which the reformers in Russia view as a vital stabi-lizing force to preserve a semblance of joint decision making among the old Soviet republics. Despite initial signs that both sides were willing to show restraint, the Ukrainians seem
in-creasingly inclined to discard the CIS in the drive to establish their own constitution, army, and currency. In short, Ukraine appears intent on creating a full-fledged independent state.
The implications are enormous, starting with the future of the
Red Army. Ukraine is already pressing its claim to one third of the Black Sea fleet; the next logical step is to demand the removal of Russian troops from Ukrainian territory on the grounds that they constitute a foreign occupying force. Maastricht summit last December which laid
down an ambitious road map for a common cur-
BY LIONEL BARBER
Just as serious are the territorial disputes,which underly the tensions between Ukraine and Russia. Russian politicians have already hinted that they are prepared to challenge the status of the Crimea, an area conquered by Russia and which arbi-trarily switched from Russian to Ukrainian possession in 1954. Such a challenge, if pursued, could be a potential casus belli.
What is to be done? So far, the West, led by the E.C. and the U.S., has focused on four areas to promote stability: humanitar-ian aid such as food and medicine; techni-cal assistance to speed the dismantling of nuclear weapons and halt the defection of Soviet nuclear scientists to nations such as Libya and Iraq; adherence to arms control treaties and principles of human rights laid down by the CSCE process; and financial aid to help the republics, mainly Russia, to continue their halting efforts to dismantle the centrally planned economy and move toward a market-oriented system.
The n-ext step is to implement a detailed economic reform program managed un-der the auspices of the International Mon-etary Fund. The program will possibly be supported by a joint multi-billion dollar western government fund that will back the convertibility of the ruble and cushion against likely balance of payment prob-lems. But all these collective efforts are plagued by the fear of failure, especially in the United States where election-year poli-tics and a longer-than-expected recession make it doubly difficult to argue the case for direct financial aid in what could easily prove to be a lost cause.
It is easy to criticize the western effort as not more than a holding action, de-signed to manage a transition which could last 10 or 20 years in central and eastern Europe, perhaps even longer in the former Soviet Union. At this stage, it begs numerous questions.
How far will the new Europe extend its frontiers? How will it cope with an ex-cluded and embittered Russia and Ukraine on its eastern border? How quickly will it give the former East Euro-pean countries of Poland, Hungary, and Czechoslovakia access to its markets, es-pecially for its farm produce? Can the E. C. avoid being overwhelmed by a flood of immigrants from east and south alike, now that the Iron Curtain has lifted, with-out breaking its proclaimed support of hu-man rights?
One conclusion must be that the Maastricht summit, rightly heralded as an
The recent violence in Azerbaijan is a disturbing indication of the ethnic tensions that boiled under the veneer of the Soviet Union for many years.
important step toward greater European union, will have to be followed up with fur-ther agreements to admit new members to the Community, particularly from the European Free Trade Area such as Swe-den and Austria.
Second, Germany will play an increas-ingly important role in formulating the Community's response to developments in the East. This should not be interpreted as a renaissance of 1930's assertiveness,
but more as a reflection of its geopolitical position, economic power, and desire for stability which makes it a natural d iplo-matic power for countries wishing to "join Europe." If proof were needed, it came when the Bonn Government, responding to appeals from Croatia, persuaded the E.C. to extend diplomatic recognition to the breakaway Yugoslav republic.
Third, the new Europe could in fact re-vert to the Old Europe of centuries past. In
the short-term, this means a decline in United States presence in Europe, without necessarily leading to a complete with-drawal of U.S. troops. Longer-term, it is possible to imagine, for example, a new economic zone made up of the Nordic states and parts of the former Soviet Union such as the Baltic countries-a re-make of the medieval Hanseatic League-working in concert with the Community. All this will require significant changes in the E. C.'s decision making process, its administrative and diplomatic machinery, as well as a complete overhaul of the
insti-tutions such as the NATO alliance which dominated the post-World War II era. The task is daunting. Nothing less is required than a new vision for Europe.
E
Lionel Barber is the United States Editor of the Finan-cial Times.
Kiev
*
UKRAINE
TURKEY
Commonwealt
Independent States
Rl
RUSSIA
Area: 6,592,800 square miles
Population: 147,400,000 (1989) Capital: Moscow Leader: Boris Y eltsin Features: Huge dams, steel mills, highways, railways. Main Industries: steel, hydroelectricity, oil, gas, rail-roads, road construction.
UKRAINE
Area: 233,100 square miles Population: 51,700,000 Capital: Kiev Leader: Leonid Kravchuk Features: Arable black soil, mineral
deposits. Main Industries: Wheat, sugar beets, potatoes, livestock, coal, iron, chemicals, salt
min-ing.
BELARUS
Area: 80,200 square miles Population:
10,200,000 Capital: Mensk (C.I.S. Capital)
Leader: Stanislau Shushkevich Features: Ar-able land, developed machinery sector. Main Industries: Machinery, steel, cement, textiles,
grain, flax, potatoes, sugar beets.
MAP IllUSTRATION BY BRAD WYE
S.)
KAZAKHSTAN
*
Ashkhabad
AZERBAIJAN
Area: 33,400 square miles Population:
7,000,000 Capital: Baku Leader: Ayaz
Mutalibov Features: High-yield winter crops, rich mineral deposits, oil fields. Main Indus-tries: Oil, iron ore, cobalt, wheat, fruits, iron,
steel, cement, fertilizers, synthetic rubber, c
hemi-cal and electrihemi-cal equipment.
ARMENIA
Area: 11,306 square miles Population:
3,300,000 Capital: Yerevan Leader: Levon Ter-Petrosyan Features: Sub-tropical climate, extensive irrigation. Main Industries: Copper, zinc, aluminum, molybdenum, marble.
UZBEKISTAN
Area: 172,700 square miles Population:
19,900,000 Capital: Tashkent Leader: Abdulkhashim Mutalov Features: C.I.S.'s chief cotton-growing area, mineral resources. Main Industries: iron, steel, vehicles, appliances,
tex-tiles, food, coal, sulfur, copper, oil.
TURKMENISTAN
Area: 188,417 square miles Population:
3,500,000 Capital: Ashkhabad Leader:
Saparmurad Niyazov Features: Kara Kum desert takes up 80 percent of the area. Main Industries: Cotton, maize, carpets, chemicals, oil, coal, sulfur, barite, lime, salt, gypsum.
TAJIKISTAN
Area: 54,019 square miles Population: 5,100,000 Capital: Dushanbe Leader: Rakhman Nabiev Features: Rich mineral de-posits, hydroelectric facilities, cattle farms. Main Industries: Cattle, cotton, grain, rice, fruits,
coal, heavy industry.
KAZAKHSTAN
Area: 1,049,200 square miles Population:
16,500,000 Capital: Alma-Ata Leader: Noursultan Nazarbayev Features: Virgin-grain lands, fisheries, vast mineral deposits. Main In-dustries: Coal, oil, iron, tin, copper, lead, zinc, fish canning.
Note: Of the original 15 Soviet republics,
KYRGYZSTAN
Area: 76,642 square miles Population: 4,300,000 Capital: Bishkek Leader: Askar Akaev Features: Cattle and horse farms, chemi-cals plants. Main Industries: Livestock, to-bacco, cotton, rice, sugar beets, machines, chemi-cals.
MOLDOVA
Area: 13,012 square miles Population:
4,300,000 Capital: Kishinev Leader: Mircea
Snegur Features: Fertile black earth, strong ag -riculture. Main Industries: grains, fruits, veg-etables, tobacco, textiles, wine, electrical equip-ment.
GEORGIA
Area: 26,911 square miles Population:
5,500,000 Capital: Tbilisi Leader: Eduard
Shevardnaze Features: World's largest
manga-nese mines, timber, coal mines. Main Indus-tries: Textiles, iron, steel, grain, tea, tobacco,
fruits.
LITHUANIA
Area: 25,170 square miles Population:
3,700,000 Capital: Vilnius Leader: Vytautas
Landsbergis Features: Arable land, livestock. Main Industries: Engineering, shipbuilding, grain, potatoes, vegetables.
LATVIA
Area: 24,595 Population: 2,700,000
Capi-tal: Riga Leader: Ivars Godmanis Features:
Livestock, developed machinery sector. Main Industries: Paper, electric railway passenger cars, oats, barley, potatoes.
ESTONIA
Area: 17,413 square miles Population:
1,600,000 Capital: Tallinn Leader: Arnold Ruutel Features: Livestock, developed
ma-chinery sector. Main Industries: Agricultural
SPECIAL
REPORT
For years the Moscow subway was a modern showpiece of the Communist Party. Now ten rides cost a single U.S. penny.
oing back to my old apartment on Moscow's Ser-pukhovsky Val, a grim 15-story high-rise on the site of the old city wall, the first change I felt was in my pocket. The Metro fare used to be 5 kopecks. Now it's 10 kopecks, which is still inexpensive. When I first began living in Moscow back in 1984, it cost me $2 to buy a single ruble at the official exchange rate. These days, even the banks will give me over 100 rubles for a dollar. Ten rides on the Metro
BY MARTIN WALKER
now cost a singleu.s.
10 ELl II() I' E
penny.
and monasteries, perhaps the last places in this collapsed economy where charity may still be hoped for.
The West always tended to think of the Soviet Union as a monolith, but it never re-ally was. To live there was to confront a schizoid culture, where futuristic images of space shots jarred with the pitiful hous-ing and the half-empty shops, where the
the barter trade, and the imported te ch-nology of fax machines and personal com-puters, has now spread throughout that in-dustrial and educated sector of the ex-Soviet economy that I think of as a state unto itself. And it was this military-industrial complex and the organized state and Party machine, that has been so thumpingly defeated in the cold war. The
Now the worry among Russians is not the length of the wait, but whether or not there will be something left to buy.
awesome skill at making weaponry clashed with the grim utility of civilian goods. Like a Third World city where the luxury high-rises towered over the shantytowns, the former Soviet Union was several contradictory societies confus-ingly lumped into one.
Try to think of the old Soviet Union as a reasonably advanced industrial economy about the size of western Germany, abut-ted by a southern and largely Muslim slice rather like Iran, all wrapped up in a vast and backwards area like Romania. And al-most everything that mattered during perestroika, and above all during the
Mos-cow coup, took place in the big urban ce
n-ters. And it all depended on the tec
hnol-ogy that the urban-industrialized sector
produced, from the tanks to the radios, from the factories to those buses that made up the bulk of the impromptu
barri-cades.
The black market dollar economy and
rotten health statistics of the Muslim south that had over a third of its young men rejected as unfit for military service in the 1980's made it almost neutral in the struggle.
The vast and miserable provincial coun-tryside has been largely untouched by the tumultuous process Mikhail Gorbachev unleashed. Until the economic reforms be-come serious to the point at which the peas-ants are given back their land and allowed to sell their crops for what they are worth,
this separation of the urban and rural economies, and the gulf between urban and rural ways of life, will remain.
What we saw in the streets of Moscow during the August coup was a kind of civil
war within the urban-industrial sector. The coup was a confrontation between the old administrative class which failed ad
-equately to transform and modernize the industrial economy, and the mass of edu-cated urban dwellers they have misruled
How the Former
USSR Has Changed.
Or Has It?
for so long. The most hopeful sign for the future is the way that the peasantry made the peoples' resistance possible by voting so strongly for Yeltsin in the Russian Presidential elections last June. Yeltsin's mandate, the political base for his dra-matic resistance to the coup and his suc-cession to Gorbachev's old office in the Kremlin, came from the urban and the ru-ral areas alike.
But Yeltsin's political honeymoon is ending. The urban sector wheels and deals on the black market, rents out its apartments to western firms for dollars and Deutschmarks, and its
schoolteach-ers write anguished letters to the papers about some of their pupils saying the most desirable career is to become a hard cur-rency prostitute.
The rural sector has fallen glumly silent again, selling its fruits and vegetables for insane prices on the free markets, and storing the potatoes in the cellar. They wait for prices to rise further, for the land to be returned, for the urban sector to learn the bitter lesson of dependence on the forgotten despised peasantry. And the Muslim south turns inward to Islam, as Saudis with their donations of Korans and mosques, Iranians with their radio broad-casts across the frontier, and Turkey and Pakistan all vie for influence.
Yeltsin is expending his political capital at a terrifying rate, as the first riots begin to protest the tripling and quintupling of prices that his bold reforms required, and as Moscow's Mayor talks of charging a ruble for each Metro ride. The Russians will survive somehow, reaching down into that traditional, awesome endurance which survived the Mongol yoke,
de-feated Napoleon, vanquished Hitler's
Wehrmacht and outlasted Stalin's Terror. But that history is exacting a dreadful
price, as the Soviet and Tsarist shell rots to expose the divisions beneath.
E
Martin Walker, formerly the Moscow bureau chief forThe Guardian, is now the Washington bureau chief.
INTERVIEW
The European Community's Man in Moscow
Michael Emerson
he European Community's Head of Delegation in Moscow, Michael Emerson, speaks out on eco-nomic conditions in Russia, E. C. food and techni-cal assistance, the C.I.S. and future business op-portunities in Russia. Emerson spoke with EUROPE's Editor-in-Chief Robert
f
Guttman at the E. C. Embassy in Moscow.What's your impression of Rus-sia since the coup? Are you pessimistic or optimistic? My first impression of the last year is of the extraordinarily dra-matic twists and turns of events that we've seen every month. These have been events of his-toric or revolutionary importance. The sensation I have now is of a situation which is certainly not yet economically stabilized. We are way off from a situation that could be described as stabilized. We are awaiting in the next few weeks ex-tremely important political events.
Walking around the city I see people selling their household goods on the street. I was just at a meat market where
people are standing in line for hours. How long are people going to put up with this? How patient are the Russian people?
In any western European country these kind of conditions would lead to a general strike in about five minutes. You have to interpret the extraordinary patience of the Russian people as a product of history. I suppose caution in responding to their great difficulties is a product of that, but it is certainly the case that when you go into the shops and see 300 people queuing up for a straggly little piece of meat, or these kind of markets that you saw this morning of individuals on a soap box just sell-ing one bottle of shampoo or one packet of cigarettes, this is an entire day's activity. It is a sobering thought to reflect upon the current productivity of a person's work if that is all they do all day.
12 E lJ ll () p E
You talked about conservative forces-is Communism totally dead in this country or could it make a come-back?
It's certainly not totally dead, but the question is really whether it remains just an old-fashioned political movement with no fu-ture representing a minority of the population. I would assert that, indeed, this is the most probable case, it is just that and
system is all about?
they represent 10, 15 possibly 20 percent of the population. They are rumbling without any decisive ef-fect.
Are we going to see a variety of fascism or nationalism, or some-thing on the right taking the place of Communism?
Those forces are also active and in-deed growing. We have some politi-cal forces that are not so far re-moved from some of the most controversial extreme right political figures in western Europe.
Yeltsin was a lifelong Commu-nist, most of the other economic reformers are former Commu-nists. Can people change that quickly and do these people who are leading economic reformers have any idea what the market
Govern-mentis remarkably well prepared. You couldn't do better, from that standpoint.
If you had to describe in a couple of sentences the situ-ation in Russia what words would you use?
Today, you have this complete contrast between the actual liv-ing standards of the people, the poor productivity of the economy, and the dilapidation of almost every piece of physi-cal infrastructure in the country-all on the one hand, and the bright, determined, enlightened, courageous policies of the government on the other.
Should E.C. and U.S. businesses invest in Russia?
Quite soon there are going to be extremely attractive invest-ment opportunities in this country, because the basic re-sources, human, material, market size are there. There'll be some sectors of the economy that should become very
profit-able, and there will be good opportunities for investment but of course you have to pick the right ones. There will be oppor-tunities.
Could you explain what the E.C. is doing overall, with food aid, and any other assistance that you're giving?
We have been increasingly present, busing supplies of food and medical assistance and of technical assistance. The commit-ments that the European Community made and are making are very large indeed. We've committed over the last two years, 850 million ECU s or over a billion dollars worth of technical assis-tance. We've given food aid grants of 450 million ECUs, about half a billion dollars. We've offered credits and credit guaran-tees totalling 1.75 billion ECUs, which is a couple of billion dollars. So, it's like 3.5 billion dollars worth of exceptional assis-tance. We've made commitments on the technical assistance side already to 400 projects. With regard to food aid we've been running throughout the last six months quite a large array, quite a large program of grants of humanitarian assistance through non-governmental organizations, 250 million ECU s worth. More recently we have innovated an extremely interesting new program for St. Petersburg and Moscow where we gave 150,000 tons of meat, butter and milk products to these two cities. We made the grant to the local economies but when the goods are received we co-manage with them the sale of these products at market-related prices. So, we've become, very, very quickly, virtually the largest supplier of grant assistance, both technical and humanitarian, to Russia.
If the E.C. weren't supplying food it seems like there might not be any food in the shops. Is that the case?
Yes, that is practically the case. We are now setting up 500 shops in Moscow and 300 shops in St. Petersburg. There are some domestic meat supplies coming in from the Russian countryside but there's virtually no butter and extremely little milk, so the European Community is the major supplier of these three key products.
That's incredible. If you think about it, Europe is feeding this area of the world. That's unique in history isn't it?
You could draw parallels from the Berlin Airlift, and you can probably draw parallels also with the Western economic assis-tance to Russia in the period shortly after the Revolution in the 1920s.
If the E. C. wasn't supplying the beef, there would be no beef. Why are Russian farmers holding back their sup-plies?
The predominant explanation is farmers are holding back sup-plying these two cities because they are not happy about receiv-ing non-convertible money in which they can't get anything in return. The farmers need to get a reasonable price, and that is the case now that prices have been liberalized. The money supplied at that price can be used to buy goods that farmers want, consumer goods. Today, they cannot use the money, and they don't particularly want to save rubles since they don't trust it as a medium of savings.
Do you think we'll see a convertible ruble someday?
The government has a plan and has a concept. It's looking for support from the West, it's fighting very hard politically to get acceptance for this program and to secure its own political position in ways I've described at the beginning. I don't have a crystal ball. It is a very, very tough job indeed, it's the tough-est form of stabilization act in the recent history of East and central Europe. I think we've got the concepts right, and we should help them.
Would the West be to blame if Russia were to go back to a totalitarian system?
We're now moving into a climax, a political and economic policy climax in the sense that the government, the Russian government, has gone beyond the point of no return with lib-eralizing prices, which now needs to be followed through very fast with macro-economic financial stabilization. In order to succeed in that, like stabilization with the worth of the ruble that I mentioned, they will surely need significant Western help. The West, for its part, is not willing to come up with very large sums of money, at least until it is convinced that the policy strategy has been adequately prepared and is working out. All of this should come together pretty fast-in a matter of weeks. It requires their actions, and it requires the West's actions. It'll be quite an exciting time. A lot of things will hap-pen very fast.
And if they don'~ happen?
We'll see continuing chaos. The elements are if the ruble in-deed does not stabilize and then the inflation becomes worse and worse you move into a period of hyper-inflation. When you experience hyper-inflation it usually means very big political in-stability and maybe a period of :flip-flop with different charac-ters, less democratic, more left/ right wing. I think the bad sce-nario that I find most convincing is the kind of political and economic cycles you see in the very large Latin American
countries.
E
SPECIAL REPORT
On
the
Way
to Moscow
Private Relief Efforts Are Ongoing in Both the U.S. and Europe.
66
have found a thief! I have found a thief!" the grimlooking Russian was shouting as he blocked the Lada
sedan coming out of Moscow's Sheremetyevo
Air-port. Inside the car, Matt Harvey, an American, cradled a carton of fine Vermont cheddar cheese in his lap as the livid police captain barked orders in the sub freezing weather.
Sensitive to growing complaints from humanitarian relief workers that much of the food coming to help the former Soviet
Union through the winter is being stolen, authorities assigned
the tough captain undercover duty at the exit on the air cargo
terminal. "I have found a thief," he yelled again, and the motley
It's awfully
hard to
swallow
democracy
with an empty
s
t
omach
.
convoy came to a stop; the Lada, an old, black Volvo, and three dilapidated Zil trucks filled with ten tons of cheddar, dry milk, and butter, all
do-nated by American dairy
farm-ers like Matt Harvey.
The captain refused to listen to the pleas that Harvey was no thief, but an American who had come to Russia to help. He gri-maced in the cold, protected by a fur cap and great coat that only
made him look more imposing. "I'm a captain of the militia
or-dered to stop the stealing," he announced firmly. "I'm not
inter-ested if it's Americans or the American president. It's all the same to me." He ordered the cheese to be checked against shipping documents and studied Harvey's identification, before finally al-lowing the shocked relief worker to proceed into Moscow.
"He was just doing his job," agreed an amused Marina Kiseijova. As the director of Door-to-Door, a Russian charity, she is coordinating direct food aid to the needy Muscovites. The wife of a popular Moscow television anchorman, Kiseljova does not need to worry about her own food supply. She volunteers to help the poor, a difficult job in a society where there was, until re-cently, officially no poverty. She and her colleagues go door-to-door through Moscow neighborhoods, checking apartments, looking for hungry people.
After several hours of exhausting waiting and paperwork-at one point an arrogant clerk refused to stamp a customs form for
an hour while she sat at her desk slowly eating her lunchtime
soup chatting with a girlfriend-the dairy farmers left the airport
BY PETER LAUFER
14 E l B ()I' 1:
happy and excited. "It's
awful hard to swallow
de-mocracy with an empty stomach," said one. "Hopefully, [the
food] won't be stolen," said another, "and we're going to follow it until it's in the people's hands."
The farmers acknowledge that their ten tons of help can only feed a few of the hungry. Other private aid providers are work-ing on a more grandiose scale. One of the most ambitious
projects is the Russian Winter Campaign, organized by San Fran~
cisco entrepreneur Jim Garrison. Suffering severe jet lag from a
ride across eleven time zones, Garrison tried to explain his
Garrison sports a fresh-scrubbed,
boy-ish face and enjoys boundless enthusiasm.
Puffy-eyed and tired, he still wants to talk
about his idea for making sure massive
amounts of food get to those in the former
Soviet Union who need it. "We are the
only group that's figured it out," he insists.
"Everybody else just drops it off at the
border and that's not good enough." Gar-rison says the key to success is to
main-tain control over the goods until they get
to those who will actually use them.
He responds to the challenge he's given
himself with evangelistic energy. ''The is-sue is not humanitarian aid," he claims. 'The issue is, will democracy survive? A parent will do anything they need to in or-der to feed a hungry son or daughter. It's just human."
Garrison wants to fill one giantAntonov 124 cargo plane a week and send it from San Francisco to the Commonwealth of In-dependent States. He says he's rounded
up enough donated food for the job: soy
burgers, powdered milk, canned beans, flour. He claims commitments from the
Soviet military for all his aircraft needs in return for 20 percent of each load. Now he wants the United States Government to
foot his jet fuel bill. "Nobody in the private
sector will give you that kind of money.
Nobody will give you $250,000 for gas. Be-lieve me, I've tried."
His Russian Winter Campaign is not just some wild-eyed dream. Garrison is well connected. He orchestrated
Ameri-can speaking tours for Eduard
Shevardnadze and Boris Yeltsin; George
Shultz and Jimmy Carter are on his list of
smiles. "The point is that they didn't turn
it over to anybody."
While Garrison struggled to get his air-lift flying, the three dairy farmers
struggled through the Moscow snow.
Their first stop was the teacher's room at Ordinary Public School Number 104. Bundled up in sweaters and a fur cap, one of the teachers offered the farmers a homemade sponge cake topped with rich
raspberry preserves. The smiling English
teacher, his long hair graying, thanked
them. "We know Americans as people
A U.S. Foreign Service officer watches over boxes of medicine at Moscow's Sheremetyevo Airport.
advisers. But more important than the
names is the fact that he has already
started delivering aid. So far flights are
sporadic, but Garrison gets a gleam in his
eyes when he plots the Campaign's future.
He wants warehouses spotted around the Commonwealth, manned by American volunteers guarding the food. He hopes to
sell what he brings and plow whatever
rubles he collects back into cash dona-tions to charities.
He brings a guidebook with him on his travels to Moscow entitled Herbert Hoover and Famine Relief to Soviet Russia
1921-23. Hoover ran the American Relief Administration, a private group
sur-rounded by controversy. Some consid-ered it a nonpolitical humanitarian organi-zation. Others saw it as an attempt by Republican capitalists to interfere with Lenin's Government. For Garrison, it's a model.
"We're doing it the same way," he
with wide souls," he said. "It seems to me
you are ready to help."
The distributed dairy products will help. A meal at the school costs parents 400 rubles a month per student, almost as much as the average Moscow salary.
Next the farmers brought their dona-tions to Orphanage Number 13, finally
seeing the food they brought in the hands
of the Russian children who will eat it. The
satisfied dairy farmers say their mission
proves assistance can get through. They
see benefits for themselves, too, if surplus milk, butter, and cheese keep coming to Moscow. By federal law, market prices back home for American dairy products
can increase when less surplus is
stock-piled.
E
Peter Laufer has reported from eastern Europe for ABC News and is the author of Iron Curtain Rising
and the upcoming Nightmare Abroad.
INTERVIEW
Harvard Economist
Jeffrey
Sachs
effrey Sachs, Harvard economist and adviser to the Yelstin Government, is an outspoken proponent of using competition and privatization to move from a controlled to a free economy. Sachs describes economic conditions in Russia today, what the West should do to assist Rus-sia and the republics, and Yeltsin 's commitment to re-form. Sachs was interviewed in
Moscow by EUROPE's Editor-in-Chief, Robert]. Guttman.
How would you describe the economic situation in Russia today?
The new Yeltsin Government that came into office in N ovem-ber inherited one of the greatest financial catastrophes in mon-etary history. At the same time, they inherited an economic sys-tem that had crumbled in virtu-ally every other dimension as well. So, they face two gargan-tuan tasks: The first and most ur-gent is to get the financial crisis
under control, and that means to end the hyper-inflation, huge budget deficits, zero foreign
ex-change reserves, high foreign
in-debtedness that they inherited;
and the second challenge is the
long term challenge of creating a working market economy out
of the rubble of the communist system. They are moving with
remarkable speed, insight, and bravery in both tasks but it re-mains today a very dangerous situation from a financial point of view and while they have made great progress in getting the
budget deficit under control and getting therefore an explosive
hyper-inflation under control, the situation remains risky.
You said that this was explosive economically. What about explosive politically?
Certainly, there are great political uncertainties right now and
any government having to manage the extent of the crisis that
this government is managing and to do it with nascent
institu-tions that are just now getting under way will find profound
political challenges. I think the whole world has to be
im-16 E UHOI'E
pressed with the skill with which they've managed, to date, but the difficulties of the situations just underscore the reasons why the West ought to be helping to support them through this very difficult process.
What should the West be doing? What should the U.S. and E.C. be doing to help the former Soviet Union and Rus-sia?
The task is not solely one for the U.S. The task is for all of the ad-vanced industrial nations and there ought to be a significant multilateral financial effort to help them succeed in the two tasks which I'd stressed: macroeconomic stabilization and transformation of the economy to a market system. We know from all of history that ending hyper-inflation requires financial help. What Russia needs is the kind of help that has always been needed to get through this very difficult financial phase. So far,
that help has not been
forthcom-ing but there are now glimmers on the horizon that the effort can get organized. The International
Monetary Fund, in February,
de-termined that Russia needs about 18 billion dollars of financial
assistance for the year 1992-six billion in the form of a
stabi-lization fund for the ruble and 12 billion in other kinds of
bal-ance of payments support. Now that this number is on the
table, its incumbent upon the Western governments to satisfy
those needs, assuming that Russia goes ahead and implements
the measures that it has discussed with the International
Mon-etary Fund.
Do the Russians need a whole new currency? How do you stabilize the ruble?
The problem with the ruble is the same problem as in any
country that is in the midst of this kind of financial crisis. Up
which reached the level of about 25 percent of GNP last year, partly to give cheap credits to enterprises, some of which could not survive without those cheap credits. So, in the circum-stances where there is rampant money printing, of course no one holds on to the local currency and the result is the kind of hyper-inflationary pressure that this economy now has. Scrap-ping the money doesn't solve the fundamental problems.
To solve the fundamental problems, you have to go to the core-to the budget deficit and to the credit policies of the cen-tral bank-and if you solve those fundamental problems you also can strengthen the existing currency without needing to replace it. Now, Russia and the International Monetary Fund have discussed these matters and the IMF has endorsed Russia's strategy for stabilizing the value of the ruble.
Of course, what's critical is not just the program, but actu-ally implementing it. Assuming that Russia does that, then the ruble can be stabilized and salvaged as a working currency and indeed a stable currency.
What would you see as the steps of how Russia moves to the market economy?
The first step is monetary stabilization to create a money that really acts as a money-that people want, that is a fi?.edium of exchange, that can be used for supporting not only domestic trade but international trade in the sense that the money is convertible into international currencies. To get macroeconomic stabilization, it is crucial to get the money sup-ply under control. That means tight credit from the central bank, it means a low budget deficit, it means prices being de-termined by supply and demand, it means an exchange rate that, for international currencies, is market-determined rather than artificially determined. With those steps, Russia would have a working money supply, people would accept rubles, goods would trade for rubles on a very normal basis as occurs in most of the countries in the world, and that would be the monetary base for the rest of the steps.
The next part of the transformation to a market economy is allowing markets to operate-liberalization, in economists' jar-gon. That means not only scrapping price controls, but also scrapping artificial barriers to international trade for most goods, ending licensing quotas which have cut off Russia from world markets for decades. It means scrapping central plan
-ning, central allocation of resources, and it means creating the whole system of private property rights to allow private enter-prises both domestic and foreign to operate inside Russia with the protection of their interests, with the ability to write con-tracts and make the variety of transactions that are fundamen-tal to market relations.
The third step of transformation after stabilization and liber-alization is privatization. That means creating real ownership for the vast range of assets which now are nominally in state hands. I say nominally because, in fact, these assets are really in no body's hands rights now. Enterprises are really not gov-erned by anybody in particular, at least not on a systematic basis and what is important is to get real ownership and real control over the enterprises by those new real owners.
Russia should be able to privatize hundreds of thousands of
small shops this year, through a variety of means and thereby create a working private economy in the wholesale, retail and trade sector within months. What eastern Europe also shows is that privatizing larger enterprises is difficult and that means that are unconventional have to be used to handle the l ogisti-cal problem of privatizing tens of thousands of larger enter-prises-and Russia is developing those methods right now and they will implement methods such as vouchers which is under development in Poland and Czechoslovakia. Russia will soon announce a program of mass privatization that will handle the logistical difficulties of privatizing thousands and thousands of enterprises rapidly.
Would people become stockholders like in Czechoslova-kia?
Yes, as in Poland and Czechoslovakia, people will be given claims on the enterprise shares at either no cost or very low cost. Enterprise shares will be distributed to the society and to the workers and management of the enterprises at quite low costs so that it could be done quickly and thereby one can build up a real ownership structure at the enterprises. It is likely that ownership will be exercised indirectly by individu-als, not as individual shareholders of particular enterprises, but rather as individual shareholders of investment funds, pension funds, and other kinds of financial intermediaries. This is what is underway in Czechoslovakia right now.
This all sounds well and good, but if you walk out on the streets, people are selling their household goods. How long are people willing to wait? How much patience do people have?
Life is extraordinarily difficult here and rather than wringing ones hands about the question of how long they are willing to wait, I wish that the' West were more active in helping to sus-tain the meager living standards here during this difficult tran-sition period. When the question is posed how long are they willing to wait, it's usually posed in a very passive way rather than the right question: What can we do to help? If the West-ern help is sufficient, if it meets the needs as defined by the International Monetary Fund for 1992, then this process can be seen through.
Does Yeltsin really have a commitment to reform? Do the economists have a commitment? Do the people have a commitment?
There is a very deep commitment in the Y eltsin government, starting with the president himself. This is a group absolutely committed to a key, basic, and correct idea for Russia and that is that Russia should no longer aspire to some special Russian way or special Soviet way, or should no longer try, as Gorbachev was always trying, to make socialism work.
Rather, Russia should aspire to be a normal economy as a fully integrated member of the world market system. So, the basic idea here is to make Russia normal-normal like West-ern Europe, normal like the United States and Japan-and they are fully committed to that and are acting with incredible vigor and insight into making that transformation successful.
SPECIAL
R
EPORT
Changing the
Stal~es
In the Cold War
'
s Aftermath
,
Geofinance Replaces
Geopolitics
or some years now, 1992 has become the global code word for the dawning of the new age of the European Community. Future historians may look back and define the year as seminal for a rather different rea-son. The year opened with two extraordinary
interna-tional gatherings, both held in the United States,
which not only redefine the shape of the new world to come, but bring a tectonic shift in human affairs into sharp focus. The old power game of geopolitics is giving way to a new strategic era of geofinance.
At the United Nations in the last days of January, Boris Yeltsin met President Bush, Prime Minister Major of Britain, France's President Mitterrand, and China's Li Peng-a summit of the world's nuclear club. This anachronism of nuclear geopolitics was billed as the first real Bush-Yeltsin summit, but may more properly be seen as the end of an era and the end of the cold war definition of "superpower." The world of missiles, MIRV's, Tri-dents, and thermo-nuclear balance, the virility
the equivalent of one day of national consumption. Bush's latest offer of $645 million will therefore keep the country going for a little more than 10 hours.
The subsequent United States airlift of 54 flights of C-5 U.S. Air Force transport planes with a maximum total cargo of 6,000 tons, will meet the ex-Soviets' consumption for about 35 minutes. (Ibe cargo is composed of surplus military rations from the Gulf War, known to the Pentagon as MREs; Meals Ready to Eat. The troops grimly dubbed them Meals Rejected by Ethio-symbols of global power since 1945, is the last
conference chamber at which Japan and Ger-many and other prosperous nations of the
0 ECD will have no place.
The real issue
pians.) And yet the West as a whole has shown anextraordinary generosity to the former Soviet Union. Since September of 1990, the total pledged in aid, grants, and trade credits has reached $80 billion. The vast bulk of this, roughly 69 percent has come from E.C. nations, and the lion's share has been provided by Ger-The suddenly diminished importance of
these awesome weapons was emphasized by the game of nuclear strip poker in which Bush and Yeltsin engaged. In a single week, Bush of-fered to halve his already-reduced nuclear
arse-is not aid
,
but
making the
case for
investment
.
nal to 4,700 warheads. Yeltsin responded by meeting Bush's bet and raising him-offering to cut each side down to 2,000 war-heads.
This rally of the nuclear club came hard on the heels of an-other international meeting where we saw the new strategic world of geofinance begin to emerge. The Washington confer-ence on aid to the former Soviet republics, launched with such fanfare by Secretary of State James Baker last year, closed with an American whimper. Bush came up with a pocketful of change, some $400 million in new money, yet to be approved by Con-gress, which would suffice to feed Russia for about ten hours.
Such, at least, is the calculation of the Russians. Although none of the 15 ex-Soviet republics was invited to the conference, Rus-sian Deputy Prime Minister Gennady Burbulis noted that in the winter of 1991 the West's total contribution of $1.4 billion, or
BY MART
IN WA
LKER
18 Ell I! 0 I' E
250,000 tons, in urgent humanitarian aid was
many. The United States contribution, even with Bush's latest donation and the credits for U.S. food which so pleased American farmers, amounts to only 6.5 percent of the to-tal, significantly less than the 7.4 percent pledged by Italy. The European Free Trade Association has pledged some 3.1 percent of the total sum. (In the light of EFTA's new association with the E.C., this means the Western Europeans have contributed over 70 percent of the global total.)
A close analysis of the figures is instructive. Germany's lavish spending is something of a special case, much of it linked to the process of buying Soviet acquiescence in German unification and to German support of Soviet troops awaiting withdrawal from
what used to be East Germany. Japan's small share of the total,
example, has pledged both directly and through the E. C., a total of $623 million. Foreign Secretary Douglas Hurd revealed at the Washington conference. "In our terms, this is a very substantial sum," he
said. However, it is less than one percent
of the world's total commitment.
Just under half the $80 billion is pledged in the form of export credits and guarantees. Of the rest, about four percent has been in the form of food and medical aid, about 10 percent in the shape of bal-ance of payments support, and 14 percent
in the form of strategic assistance (largely
German subsidies of Soviet forces and United States help to dismantle nuclear weaponry).
So a future historian may judge that Bush's claim to global leadership, so
deci-sively asserted in the Gulf War last year,
was surrendered at that Washington
con-ference. Economic recession, budget
pressures, and political restiveness at a lavish international role have combined to push the United States down to a lower level in the effort to rescue Russia.
Japan and Germany (or perhaps the
E. C. as a whole) have already pointed out
that wealth and population give them a claim upon the United Nations Security Council seats Britain and France have oc-cupied since 1945. In the new world of geo-finance, their trade surpluses and
eco-nomic robustness are starting to loom larger than the missiles of the past.
The suddenly diminished importance of these
awesome weapons was emphasized by the
game of nuclear str
i
p poker in which Bush and
Yeltsin engaged
.
"A new world is emerging, and it looks
as if the United States is going to be
ab-sent at the creation," Senator Joseph
Eiden complained as the conference
closed.
There is another, perhaps equally dis-turbing factor to consider. In an American
election year, where both Bush's
Republi-can and Democrat challengers are
stress-ing the need to help Americans at home rather than former enemies abroad, the
real case for helping the Russians has gone by default. American generosity in times of humanitarian need is beyond doubt, but aid is not really the issue. Nei-ther Russia nor the Ukraine are
Bangladesh or Ethiopia. There may be
short-term distribution problems but even
the former Soviet Union could always feed
its people. It imported grain in order to feed its livestock.
The real issue is not aid, but making the case for investment. The 350 million people of the former Soviet empire (which
includes eastern Europe) represent a vast
credit bank of human capital. Educated,
civilized, and hungry for prosperity, rich
in energy and natural resources, they
rep-resent an enormous potential. The great locomotive of global growth in the 45
years after World War II was the
astonish-ing success of the West Europeans and
the Japanese in hauling their living stan-dards up to North American levels. In the next 45 years, the challenge will be to help
the ex-subjects of Stalin's grim empire
fol-low that example. This means the West
should learn to think of investment rather
than aid, and act from thoughtful
self-in-terest rather than spasmodic charity. And this means understanding how the old
geo-politics of military power is dying as
we watch. As Boris Yeltsin has found, nuclear strategic power has little meaning in the new age of geo-financial politics.
E
Martin Walker is theW ashington bureau chief for The Guardian and author of several books on Russia.
Total amount of assistance pledged to the ex-Soviet Union since September 1990 (percentage)
